27/10/25

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The AUD/USD currency pair opened the new trading week with notable strength, driven by positive developments in US-China trade negotiations and a broadly optimistic risk environment. Market participants responded to reports indicating that US and Chinese officials agreed on a framework for a potential trade deal, which is slated for discussion during upcoming high-level talks between President Trump and President Xi Jinping. Additionally, comments from US Treasury officials eased fears surrounding the possibility of imminent tariffs, suggesting that a 100% tariff levy on Chinese imports scheduled for November 1 may be averted. These developments fostered sentiment that a trade war escalation might be avoided, bolstering risk-sensitive assets such as the Australian dollar.

The renewed optimism extended to global stock markets, which surged sharply, reflecting a shift towards risk-on trading behavior. Simultaneously, expectations of looser monetary policy from the Federal Reserve gained traction, further diminishing the US dollar’s appeal as a safe haven. Federal Reserve rate cut prospects intensified following recent US inflation data, with traders now pricing in near certainty that the central bank will cut rates at its upcoming policy meeting, with additional easing expected in December. The Consumer Price Index figures indicated a modest month-over-month increase, suggesting inflation remains contained while allowing the Fed greater flexibility to ease policy without stoking inflation concerns.

Despite the positive backdrop, the Australian dollar’s advance was restrained ahead of key events. The market remains cautious, with traders hesitant to commit large bets ahead of the Federal Open Market Committee’s policy announcement and the high-profile Trump-Xi summit later this week. While technical signals show a bounce from crucial moving averages and Fibonacci retracement levels, traders are awaiting confirmation of a sustained breakout above recent trading ranges and resistance levels. An upward move beyond the 0.6580 area could open the way to test the year-to-date high near 0.6700, while support levels around 0.6500 are expected to contain falling prices, at least temporarily. Should the pair decline below key supports, it may target the July lows around 0.6380, with further downside potential towards 0.6300 if bearish momentum persists.